Posts Tagged 'insurance'

I sat and watched it again last night, from a different perspective. The Budget speech handed down (why do they say “handed down” when it is “dished up” to us?) by a rather smug treasurer, knowing that all the bad news had been pre-delivered so there would be no bad headlines from the “budget reviews”… It’s an election year, so bad headlines just won’t do… But what DID we get?

If you tell a big enough lie, the world will believe you, no matter how bad the lie!

Think Bernie Madoff in the USA, now in jail, but for a number of years, he was consulted by many of the best so-called financial minds of the times on matters of top level financial strategy. And the guy was pulling the most outrageous scam ever perpetrated on the public or the American people! But the lie was so huge – into the billions of dollars, that no-one believed he could be telling a lie that big.. So they believed him! Now where was I? That’s right, the Federal Budget, and Mr Swan…

He said “Growth is over 3% and spending is under 2%, therefore we are reeling in the deficit and the country is doing fine…”

The proposal though, is to slam the high earners with a massive tax on profits above bank bill/cash management account rates (somewhere between 6% and 10%) and still expect the growth and earnings to continue… What do they think will be left to tax?

Rather than an omelette, we are having roast golden goose for Christmas Dinner this year!

What is the purpose? Why tell such lies? And that’s not the only one – the whole budget is based on that lie and as such, the forecasts and expectations and promises will again fall over… But it’s an election year, and Kevvy and Wayne are going to make it all right for the poor people out there! Just vote them in again and everything will be OK…

Yeah right… And there’s still some swampland available up here too, if you’ll buy that line..

So how DO we get ahead in this economic climate? There are some things that have been done by governments over the last few decades that if accessed properly, CAN make a difference.

For many people, they are sitting on property and/or equity that they have been terrified into guarding like crazy, in case things ‘go bad’ again. That equity, people, is like a savings account and it doesn’t earn you a great deal. It can be used, very carefully though, to multiply it’s own value, and increase the dollar value of your asset portfolio. There have been laws set up and tested, to make sure that the “negative gearing” principles are secure. No, I don’t necessarily endorse negative gearing, but I love positive gearing – using your assets to create a positive cashflow investment strategy, which by definition is self funding.

The second item of significance is superannuation. It’s only charged tax at 15% so that your tax deductible contributions get a HUGE boost with any profit you make by investing with it! If you choose a Self Managed Super Fund (SMSF), you also get to decide where it’s invested and there are some great opportunities out there now.

In 2007, the law was changed so you could invest into property with borrowings, if done in a certain way so that the super fund assets were protected. Again, a great opportunity for savvy investors. You can invest into certain property within your super fund in a cashflow POSITIVE way, so it pays itself off for you! And after the age of 60, with appropriate advice, you can get your investment out tax free!

You also need to protect what you already have, with risk management and insurance strategies. That can be expensive, but if you have cashflow positive investments, they can pay for it so you get your insurance virtually for free!

Now, you’ll note that Wayne Swan and Kevin Rudd have not featured in the solutions part to getting ahead in this economic climate! And they never will!

Waiting for the government to provide solutions is like wating for the climate to change. It will, over time, in it’s own time, and there’s not a lot we can do about it in the meantime! But we CAN take responsibility for it ourselves…

I’m just annoyed that so few people have recognised the lie of the budget, and are fussing over the details built around it!

Ray Jamieson

NOTE and DISCLAIMER: I am a licenced financial adviser and this post is not, in any way, advice to any person on any strategy. It is a commentary and observation on a current, topical and important situation, and compares the possible opportunities of taking personal responsibility to waiting for a government to make things better. It also conveys, I hope, my professional disgust at what appears to be another great big scam job!